I write about living your richest life while transitioning to retirement, working in retirement and personal finance. I firmly believe that we can have it all – a rewarding career and fulfilling personal life while planning for retirement.

My life reflects this philosophy. I didn’t wait until retirement to move to Park City, Utah where I enjoy the “greatest snow on earth.”

The advice provided is not personalized investment advice, may not be suitable for your individual situation, are not guarantees of future performance and may differ materially from actual events that occur.

Please note - Nancy Anderson is a Senior Financial Planner with Key Private Bank. The views expressed by Nancy are her personal opinions and not those of Key Private Bank. Key Private Bank shall not be liable for any claims or losses of any nature, including, but not limited to, lost profits, punitive or consequential damages.

When It Makes Sense To Take Social Security Income At 62

Financial decisions are rarely cut and dry since rules don’t necessarily apply to every situation. For example, a 61½-year-old former financial planning client of mine was dead set to delay applying for Social Security. He’d heard (correctly), the longer he delays starting his payments up to age 70, the higher the monthly benefit he receives from Social Security for the rest of his life. In his situation however, “the delay as long as possible” rule of thumb doesn’t work.

The concept is spot on though. Waiting until your full retirement age can provide a higher lifetime income. When you file for Social Security at your full retirement age (which depends on your birthdate and is currently age 66), you receive 100% of your benefit. If you take your benefit early, at age 62, you only receive about 75% of your monthly benefit. Every year you delay taking it, your benefit goes up until age 70. If you delayed until then, you’d have approximately 132% of your benefit. At first, glance waiting seems to be the best decision.

In my client’s case, he needs the income now. Two years ago he and his wife relocated to another city and while she is working full time, he has yet to find a comparable position. They have been making ends meet by taking withdrawals of about $20k per year from his IRA rollover – he is over 59 ½ while the funds are taxable, there is no early withdrawal penalty.

Delaying Social Security in his case is robbing Peter to pay Paul since he is pulling out retirement savings to do it. He is an exception to the rule and might be better off taking the Social Security at age 62.

There are other circumstances where it might be better to take Social Security income early instead of delaying. Here are a few:

You can’t find full time work. Older workers may not have the highest unemployment rate but it takes them longer to find work once they are unemployed. A 2012 Pew Research study reported more than 43% of workers who were unemployed for at least a year, were 55 years old and over. If unemployment insurance has run out and you need the funds, taking Social Security income early might be an answer for you.

The good news is there is a way you can pay it back. If you take Social Security income and your circumstances change, you can “withdraw your application” even if you have been taking income. You can pay it back but note that you can only do this in the first year. Once you have taken benefits 12 months or longer, this option isn’t available.

You are working part time. You can still earn income when you draw Social Security early, there are limits though. In 2014, you can earn up to $15,480 a year and receive your early Social Security payment. Over and above that threshold, your Social Security payout is reduced by $1 for every $2 you earn. In the year you reach your full Social Security age, you can earn up $3,450 a month before you reach 66, without affecting your benefits. (In that year, it’s reduced by $1 for every $3 you earn over the limit).

The bottom line is if you earn more than the threshold, it doesn’t make sense to take your benefit early. Once you have reached your full retirement age, you can earn as much as you like from a job or business and it doesn’t affect your Social Security benefit.

You want your funds to go to a beneficiary. If your motivation is to pass assets on to someone you care about, you may want to take your Social Security early, then save or invest it. But remember, when you pass away, your spouse will get your monthly Social Security benefit if it’s higher than what he or she would otherwise receive. That’s why, when both spouses work, it often makes sense for at least one of them to wait until 70 and one to take benefits earlier.

At whatever age you take your Social Security benefit, there is no obligation to spend it. You can save or invest your monthly benefit amount and name beneficiaries on those accounts. Taking Social Security early may bring you less income per month but at least you can designate what you’ve personally collected to go to some else.

You want to invest in something else. Assuming you don’t need the income and you aren’t earning more than $15,480 a year from working, you can always receive your benefit and invest it for yourself. Some retirees use the monthly Social Security benefit check to cover a vacation property or second home mortgage payment so they can enjoy having a special place for family and friends to gather or simply to enjoy some R&R during their retirement years.

You are single or don’t need to maximize your spouse’s Social Security income. A spouse receives their own Social Security benefit or half of their spouse’s benefit, whichever is higher. So this means, in some circumstances, the higher your benefit, the higher your spouse’s benefit. There are various strategies for maximizing couple’s Social Security income (we’ll cover this in future blogs) so if you are married, you want to make sure you aren’t shooting yourself in the foot by taking your benefit early. I’d recommend discussing the strategies with a financial advisor and a tax advisor before filing for Social Security benefits.

When you have a short life expectancy. The question on everyone’s mind when waiting to take Social Security with the hopes of getting more income later is, how long do I have to live to make it up? Benefit evaluation calculators like the AARP or T Rowe Price’s can provide a personalized estimate for you.

I don’t know about you, but I’d love to live to past age 85. It might happen but if nature is more powerful than nurture, I might not make it. My maternal grandmother and my mother both passed away at 71. So in my case, it might make sense to go with the “bird in the hand” and take a Social Security benefit early. What about you?

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.